Slide 1: Second Quarter 2014 Earnings Conference Call
Regal Beloit Corporation Second Quarter 2014 Earnings Conference Call July 30, 2014 Mark Gliebe Jon Schlemmer Chairman and Chief Operating Officer Chief Executive Officer Chuck Hinrichs John Perino Vice President Vice President Chief Financial Officer Investor Relations
Slide 2: Safe Harbor Statement
Safe Harbor Statement This presentation contains “forward-looking statements” as defined in the Private Securities Litigation Reform Act of 1995. Forward-looking statements represent our management’s judgment regarding future events. In many cases, you can identify forward-looking statements by term
Slide 3: Non-GAAP Financial Measures
Non-GAAP Financial Measures We prepare financial statements in accordance with accounting principles generally accepted in the United States (GAAP). We also disclose adjusted diluted earnings per share (EPS), adjusted gross profit, adjusted gross profit as a percentage of net sales, adjusted income
Slide 4: Agenda
Agenda Opening Comments Mark Gliebe Financial Update Chuck Hinrichs Operations Update Jon Schlemmer Summary Mark Gliebe Q&A All p4
Slide 5: Opening Comments – 2nd Quarter Results
Opening Comments – 2nd Quarter Results > Solid 2nd Quarter Results in Sales, Earnings and Free Cash Flow > Adjusted EPS* in Line with Guidance > Revenues Up 3.5% Over Prior Year − N.A. HVAC − Europe − Power Generation − N.A. Mechanical − N.A. C&I Motors − China and India − Australia − Cemp and Hy-Bo
Slide 6: Opening Comments – 2nd Quarter Results
Opening Comments – 2nd Quarter Results > Improvement in Operating Profit Margin > Simplification Projects Progressing − Acuna and Australia on Schedule − Springfield Timing Delaying Benefits − No Change in Expected Benefits > Announced Closure of Two U.S. Plants > Strong Free Cash Flow Performance >
Slide 7: Opening Comments - 3rd Quarter Outlook
Opening Comments - 3rd Quarter Outlook > Growth in N.A. HVAC > Flat in N.A. C&I > Strong Growth in Mechanical and Europe > Improvement in China and India, Weakness in Australia > Instability and Uncertainty in Venezuelan Market − $4 to $5 Million Margin Decline > Benefits from Springfield Transition
Slide 8: 2nd Quarter Financial Results
2nd Quarter Financial Results ADJUSTED DILUTED EARNINGS PER SHARE* Three Months Ended Six Months Ended Jun 28, Jun 29, Jun 28, Jun 29, 2014 2013 2014 2013 GAAP Diluted Earnings Per Share $ 1.24 $ 1.13 $ 2.20 $ 2.22 Restructuring Costs 0.05 0.02 0.11 0.03 Purchase Accounting Costs 0.01 — 0.03 — Retro
Slide 9: 2nd Quarter Financial Results
2nd Quarter Financial Results > Sales of $850.4 Million, Up 3.5% from Prior Year – Foreign Currency Translation Reduced Total Net Sales by 0.4% – Sales from Acquired Businesses $31.8 Million – Organic Sales Flat to Prior Year* > Adjusted Gross Margin* of 25.2% vs. 25.6% in Prior Year – Adjusted for
Slide 10: Key Financial Metrics
Key Financial Metrics Capital Expenditures Effective Tax Rate (ETR) > $20.6 Million in 2Q 2014 > 26.5% ETR in 2Q 2014 > $80-$85 Million Est. for FY 2014 > ~ 27% ETR Est. for 2H 2014 Balance Sheet at June 28, 2014 2Q 2014 Free Cash Flow* > Total Debt of $767 Million > $79 Million > Net Debt of $322 M
Slide 11: 3rd Quarter 2014 Guidance
3rd Quarter 2014 Guidance > GAAP EPS Guidance of $1.05 to $1.13 > Adjusted EPS Guidance of $1.12 to $1.20 – $0.05 of Restructuring Charges – $0.02 of Purchase Accounting Adjustments > $4 to $5 Million Profit Headwind from Venezuelan Operations > Guidance Excludes Potential Devaluation of the Venezue
Slide 12: End Market Update
End Market Update > Solid N.A. Residential Product Growth – N.A. HVAC Up 3.3% – Similar Growth in non-HVAC Residential Products – Expecting Mid Single Digit Growth in 3Q > N.A. Commercial & Industrial Motor Sales Down 2.7% – Commercial & Industrial Refrigeration and Irrigation Sales Down – Expecting
Slide 13: End Market Update
End Market Update > N.A. Mechanical Sales Increased 2.8% – Driven by Increased Demand for Hydraulic Fracturing Equipment – Improved Distribution Sales – Expecting Solid Growth in 3Q > International Sales Mixed – Growth in Europe and Latin America – China Sales Down Slightly – Challenging Conditions
Slide 14: Design Platform Simplification
Design Platform Simplification Platform Description 48 Frame Fractional HVAC Motors Fractional HVACR Motors 3.3” and Blowers Worm Gear Mechanical Industrial Motors for Asia IEC (IE3) and Europe 48/56 Frame Fractional C&I Motors
Slide 15: TerraMAX Industrial Motors
TerraMAX Industrial Motors >One Platform for the IEC Industrial Motor Market >High Efficiency Design (IE3) >1 to 500 Horsepower >Produced in New Wuxi China Facility >Destination Platform to Replace Multiple Existing Product Designs >Europe Moving to IE3 in Jan 2015, Conversion Expected over Next Thr
Slide 16: Footprint Simplification
Footprint Simplification > Springfield, Acuna and Australia Programs – Progressing Forward, Customer Demand Creating Challenges – Expect to See Benefits in 4Q and 2015 > Announced Closure of Two Kentucky Manufacturing Facilities – Moves Motor Parts Production Closer to Motor Assembly Operations – Ex
Slide 17: Benshaw Overview
Benshaw Overview > Manufacturer of Custom Low and Medium Voltage Drives and Soft Starters > Annual Sales of $60 Million > End Markets Include Commercial HVAC, Oil & Gas and General Industries Fits Well with Unico and Global C&I Businesses
Slide 18: Benshaw Overview
Benshaw Overview Accretive > Complementary product lines for Earnings Per Share existing motors and low voltage drives Pump $0.09 Storage Tank Battery > Increases capability to provide variable speed solutions and energy efficiency $0.06 > Adds advanced control technology and talent ($0.02) 2H14 201
Slide 19: Closing Comments
Closing Comments > 2Q 2014 Results in Line with Guidance > Another Simplification Project Announced > Announced Benshaw Acquisition > Acquisition Pipeline Strong > Strong Balance Sheet Provides Flexibility p 19
Slide 20: Questions and Answers
Questions and Answers p 20
Slide 21: Appendix Non-GAAP Reconciliations
Appendix Non-GAAP Reconciliations ADJUSTED DILUTED EARNINGS PER SHARE* Three Months Ended Six Months Ended Jun 28, Jun 29, Jun 28, Jun 29, 2014 2013 2014 2013 GAAP Diluted Earnings Per Share $ 1.24 $ 1.13 $ 2.20 $ 2.22 Purchase Accounting Costs 0.01 — 0.03 — Restructuring Costs 0.05 0.02 0.11 0.03 R
Slide 22: Appendix Non-GAAP Reconciliations
Appendix Non-GAAP Reconciliations ADJUSTED Income From Operations* Three Months Ended Six Months Ended Dollars in Millions Jun 28, Jun 29, Jun 28, Jun 29, 2014 2013 2014 2013 GAAP Income from Operations $ 87.7 $ 81.1 $ 157.4 $ 157.0 Purchase Accounting and Transaction Costs 0.8 - 2.1 - Restructuring
Slide 23: Appendix Non-GAAP Reconciliations
Appendix Non-GAAP Reconciliations EBITDA Reconciliation Dollars in Millions 3Q 2013 4Q 2013 1Q 2014 2Q 2014 LTM Net Income $52.6 ($33.2) $43.8 $56.2 $119.4 Asset Impairment and Other, Net - 81.0 - 1.0 82.0 Plus: Minority Interest 1.9 0.4 1.2 1.9 5.4 Plus: Taxes 15.0 -3.7 16.0 21.0 48.3 Plus: Interes
Slide 24: Appendix Non-GAAP Reconciliations
Appendix Non-GAAP Reconciliations Organic Growth Reconciliation Net Sales Quarter Ended March 29, 2014 $850.2 Net Sales from Businesses Acquired Within Last Twelve Months (31.8) Impact of Foreign Currency Exchange Rates 3.3 Adjusted Net Sales Quarter Ended March 29, 2014 $821.7 Net Sales Quarter End